Book notes: The Startup Checklist

Synopsis: “The Startup Checklist is the entrepreneur’s essential companion. While most entrepreneurship books focus on strategy, this invaluable guide provides the concrete steps that will get your new business off to a strong start. You’ll learn the ins and outs of startup execution, management, legal issues, and practical processes throughout the launch and growth phases and how to avoid the critical missteps that threaten the foundation of your business. If you’re ready to do big things, this book has you covered from the first business card to the eventual exit.

The typical American startup costs over $30,000 and requires working with over two dozen professionals and service providers before it even opens for business – and the process is so complex that few founders do it correctly. Their startups’ errors often go unnoticed until the founder tries to seek outside capital, at which point they can cost thousands of dollars to fix…or even completely derail an investment. The Startup Checklist helps you avoid these problems and lay a strong foundation, so you can focus on building your business.” -Amazon

Opening Thoughts:

I picked up this book mostly to help give me an idea of how to start my own startup, which is currently in the works. I was looking to have this book balance out the others I had selected for the month because it seemed more tactical and step-by-step compared to Born a Crime and Linchpin.

Key Notes:

Chinese proverb: to open a business is easy, to keep it open is an art

25 Steps:

Translate your idea into a compelling business model

It is crucial to distinguish the business concept from the product concept

Articulating what you’re doing and why is your business concept

It’s possible to copy a successful business model

3 characteristics that make a startup business model truly scalable:

You have to be able to start small

Your marginal cost must drop overtime so that each additional dollar of revenue costs less than the previous dollar

Your scalability needs to be built into your business model rather than relying on any special exogenous factors

Craft a lean business plan to serve as your plan A roadmap

Principles of lean business planning:

Do only what you’ll use

It is a continuous process, not just a plan

It assumes constant change

It empowers accountability

It’s planning, not accounting

Transactions are two accounting as projections are to a business plan

How to make a lean business plan:

Set your strategy

Plan your tactics to implement the strategy

The concrete specifics

The single most important component of any business plan is a review schedule

There is no real plan without milestones

Find and know your competitors, and analyze the strategic landscape

Counterintuitively, experience has shown that a business arena with no competitors is considerably difficult to conquer then one in which other people have paved the way for you

Study the competition and rival firms in your industry

Saying you have no competition will devalue your position

Keep in mind that in addition to direct competitors, you will be competing with other companies that are meeting the same underlying need or providing the same kind of value by other methods

Knowing what your rivals are doing is essential to competing with them

Draft your founding dream team

The entrepreneurial function can be combined. In the same package as a tech person, a sales guy, a user interaction person, or a financial person

Answer the question: which pieces do you have? Which pieces do you lack?

Are you the entrepreneur? In reality, only a tiny percentage of people actually are

The crucial thing is being honest with yourself because answering this question will let you know the type of cofounder you are seeking

You need to ask me specific questions to set expectations from the beginning with all co-founding parties

Even in an equal partnership, one member of the founding team must have the ultimate decision-making authority otherwise the company risks being locked into indecision

That is the one thing it cannot afford

Allocate the equity in your start up

The founders need to decide and split of equity relative to the value that everyone is bringing to the table

You can measured by the amount of value added for the amount of time

Another option is the cost to replace the person with someone else

Build a minimum viable product and validate your plan with customers

Establish your brand with online public profiles

Network effectively within the entrepreneurial ecosystem

Incorporate as a Delaware C-Corp for protection and investment

Incorporate when you have any one of the following:

A partner, an employee, and investor, customer, Grant, bank accounts, any intellectual property, any potential liability, or any assets

Benefits of incorporating: limited liability, and ownership is divided into shares

Most companies are incorporated in Delaware even if they don’t reside or have customers in Delaware as it is more attractive to investors

Lawyer up the right way

Choosing the right lawyers

The combination of integrity, competence, and deal closing is what sets apart The great start up lawyers from those who are merely good

Recruit your Board of Directors and advisors

Great advisers and mentors are worth their weight in gold

Your board members should be able to deliver one or more of the following: wealth, work, or wisdom

Board of advisors, a group of people who have a more informal roll

Mentorship: A personal developmental relationship in which a more experienced or more knowledgeable person helps to guide a less experienced or less knowledgeable person. It is a learning and development partnership between someone a vast experience and someone who wants to learn

When the student is ready, the guru appears

Select an accountant and an accounting system

The tool to keep track of all the company’s financial transactions it’s called the general ledger

The process of maintaining the general ledger by recording financial transactions is referred to as bookkeeping

The general ledger reflects five categories of items: assets, liabilities, owners equity, revenue, and expenses

The income statement lists your businesses revenues and expenses for a given period of time. It is also called the profit and loss statement

The balance sheet shows the assets and liabilities of the business at a given moment in time

Assets minus liabilities equals its net worth

Establish and manage your credit profile

Open bank, Credit card, and merchant accounts

Where a business account is primarily used to manage your funds and pay vendors, merchant accounts are used primarily to except credit card payments from customers

Payment processing services:

Braintree, Stripe, and Square

Choose your key Technologies, platforms, and vendors

Measure your business with data analytics

Round out your team with employees and freelancers

Establish a stock option plan to incentivize your team

Preferred stock is good if the company tanks, common stock is good if the company is a hit

Convertible stock is what the founder owners usually get and can be converted to either

Understand the funding process and what investors want to see

Nurture your investor pipeline

Fund raise with online platforms

Understand term sheets and prepare for do diligence

Get the most from your investors now and in the future

Determine what your company is really worth

Keep your eye on the exit and reap the benefits of success

Closing Thoughts:

After listening to the first chapter, I felt like I’ve listened to enough and wanted to be done with it. I didn’t want to not complete the book so I decided to just take down the key notes (basically just the chapter outlines in the first chapter) with whatever I found interesting. Aside from that, I was just passively listening to the book.

The main reason why I sped through the book was because it wasn’t applicable to me at all. I could tell from that first chapter that this book was going to go way down the wrong rabbit hole. It’s definitely geared towards someone who seriously plans on making the next Facebook, Snapchat, or Instagram, and plans to eventually sell the company for 8-10 figures or plan for an IPO. In that sense, this wasn’t the right book for me at this point in my life. I still wanted to take notes because when I get to that point, at least I know this book will be a good reference.